Friday, July 27, 2012

U.S. banks have become victims of the foreclosure crisis.Given today’s political environment, it is hard to think of banks as victims of anything.However, during this foreclosure crisis, overly-creative attorneys, misguided consumer advocates, and desperate homeowners filed numerous lawsuits against banks on the false legal theory commonly called “Show Me the Note.”In Hogan v. Washington Mutual Bank, decided July 11, 2012, the Arizona Supreme Court debunked the Show Me the Note theory and concluded that banks must simply follow the current foreclosure laws as written.

Under the Show Me the Note theory, the homeowner admits he/she is in default but still files a lawsuit claiming that the bank cannot foreclose unless it “shows possession of, or otherwise documents its right to enforce, the underlying note.”As the theory goes, the promissory note and the deed of trust “go together” and “must be construed together;” therefore, proving mutual possession of the original promissory note and the deed of trust is mandatory before foreclosure begins.Frequently, the homeowner will allege that the bank must produce the “wet ink” signature on the promissory note and not simply a photocopy.At the end, the homeowner seeks to own the home free of the bank without paying off the promissory note.

This theory is baseless and was advanced by attorneys who did not understand the foreclosure laws or were abusing the system.However, the cases were so pervasive that the Arizona Supreme Court took up the issue.The Arizona Supreme Court explains as follows:

. . . the note and the deed of trust are . . . distinct instruments that serve different purposes. The note is a contract that evidences the loan and the obligor’s duty to repay. See A.R.S. § 33-801(4). The trust deed transfers an interest in real property, securing the repayment of the money owed under the note. See A.R.S. §§ 33-801(4), -801(8), -801(9), -805, -807(A). The dispositive question here is whether the trustee, acting pursuant to its own power of sale or on behalf of the beneficiary, had the statutory right to foreclose on the deeds of trust. See Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1043-44 (9th Cir. 2011)

In other words, the Court is saying “you don’t get it.”The underlying message is that when the homeowner fails to pay on the promissory note, the deed of trust may be foreclosed, regardless of who “owns” deed of trust and regardless of whether the deed of trust and promissory note are owned by the same person.The deed of trust and promissory note are not dependent upon each other.Homeowners facing foreclosure can recover and find solutions; however, filing a Show Me the Note lawsuit will not help.

Friday, July 20, 2012

Nothing looks more suspicious,
though quite common, than the dying man who makes a deathbed will.It is the stuff of Hollywood.Picture the elderly man summoning his lawyer to
his deathbed.The lawyer drafts the will
as the invalid dictates the contents.The invalid declares that his entire estate shall pass to his wicked mistress—a
young looker and manipulative gold digger.The scarlet woman places the pen in the man’s hand and firmly demands, “sign
it.”The will is signed.The priest reads the testator’s last rites as
his soul leaves his body.His faithful
children are now destitute.

Of course, a lawsuit will
follow.The faithful children accuse the
mistress of unduly influencing their father and demanding, in court, that the
judge refuse the will.After all, why would
a loving father not provide for his children at death?Had the mistress not used her seductive powers
and lies to poison the mind of their father, the children would enjoy a
profitable future.Unfortunately for the children, a woman’s seduction
alone is not enough to invalidate a will.

Conduct by which a person unduly
influences a testator in executing a will, when that person through his power
over the mind of the testator makes the latter’s desires conform to his own,
thereby overmastering the volition of the testator.

The court reasoned that
a woman’s seductive power does meet this standard:

It is settled law of this state
that [an] illicit relationship is not sufficient per se to warrant a conclusion
of undue influence.And no presumption
of undue influence arises merely from the fact that a man. . . makes a will in favor of his mistress.”

Id.
(citations omitted).So, unlike in the
movies, in real life, the wicked mistress just might win.

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About Me

Robert Sewell is a litigation attorney in Tempe, Arizona, practicing in the following areas:

• Commercial litigation
• Probate and trust litigation
• Collections

Mr. Sewell’s litigation experience involves cases in federal, state and administrative settings. He has also resolved disputes through mediation, arbitration, as well as bench and jury trials. Clients choose Mr. Sewell because of his reputation for success, his insight into the law, and his pragmatic approach to litigation and its costs.